Banking Groups and State AGs Clash Over CLARITY Act

A group of eight banking associations and 17 state attorneys general have expressed concerns about the CLARITY Act, a bill aimed at creating lasting rules for digital assets. The banking groups argue that the current language in the bill could allow stablecoin providers to offer rewards similar to interest on bank deposits, potentially draining deposits from regulated banks.

The banking associations claim that stablecoins with incentives tied to payment balances could encourage customers to move their money out of regulated banks, hindering the ability of depository institutions to extend credit to their customers. They are requesting changes to Section 10404, which covers payments and incentives linked to payment stablecoins.

The state attorneys general, led by New York Attorney General Letitia James, have also raised concerns about the bill. They argue that federal preemption provisions in the legislation could restrict state powers to pursue crypto fraud and create uncertainty over cases brought against crypto businesses.